Three years back, I consulted your members for help putting our retirement portfolio on track. I am forever grateful for that assistance. That experience gave me a new sense of confidence in my abilities to manage our retirement money. I am no longer plagued with a constant worry that I am going to botch it. I can now say with confidence that I have a plan and I am sticking with it. I no longer dread the quarterly statements, the difficult decisions are behind me and I am in tweak mode.

That said, HIS 401K provider has revamped their Putnam fund options and I was hoping that I could receive a second look. The fund choices now available went from 29 to 41. The changes include adding the word "Dynamic" to the Putnam Asset Allocation Funds. Unfortunately, most of the options still have ER fees above 1+%. It was disappointing to see that no low cost funds were added to the repertoire. I guess it makes for easier selection. I do have a plan, but wanted to confirm my thought process with experienced Bogleheads.

1. I was wondering if the Loomis Sayles Bond (LSBDX)(.63) should replace the PIMCO Total Return (PTRAX)(.71)?2. The Putnam Stable Value expense ratio is edging up, but the ER is still lower than the other bond options. The performance has always been lower than the rate of inflation while I only owned it these past few years. Is it still worth keeping as it adds to my bond diversification?3. Is global bond diversification a worthwhile option -Templeton Global (TPINX)(.90)? I currently have a very small quantity of global bond diversification by holding PIMCO and Harbor. Morningstar says that PIMCO has 19% invested outside the US and Harbor has 17%.4. Tips on how to approach your employer about adding low cost options?5. Every year we receive a copy of the “Summary Annual Report for…Profit Sharing/401K Plan and Trust”. As I look at 2011s summary, the Plans expenses were $923,332. During the year, the plan experienced a decrease in assets of $334,376. The plan had a total income of $588,956, including employee contributions of $615,823, employer contributions of $280,134 and earnings from investments of ($307,001). I really don’t know what to make of this information. What should I be learning from this information? and what actions should I be taking besides filing it in the tax box?

5. The decrease in assets in your plan is almost certainly from folks who have left the company or who are in the withdrawal stage, so it is not something to worry about. The negative "earning from investments" is logical since 2011 was a slightly down year for investments. Anyways, I didn't see anything to worry about here (except expenses) as long as the total value of the company 401(k) is more than $10 million.

cordanmom wrote:1. I was wondering if the Loomis Sayles Bond (LSBDX)(.63) should replace the PIMCO Total Return (PTRAX)(.71)?

Loomis Sayles Bond (LSBDX) is a very different fund from PIMCO Total Return. Loomis Sayles Bond tracks the Barclays US Government/Credit Index. Based on reading about it in Morningstar, Loomis Sayles Bond invests in government (20+%) and corporate (aka junk) bonds (62+%), with various durations (short, medium and long) and only 63% in USA along with 16% in Canada.

If you compare LSBDX and PIMCO's Total Return, and Vanguard's Total Bond Market Index Fund VBMFX, you'll see that LSBDX is much more volatile with bigger lows (it dropped a lot in the 2008/2009 financial crisis) but higher returns overall HISTORICALLY (not sure what to expect moving forward). If you want this fund, you should not look at it as a conventional bond fund but maybe have just 20% (?) of your overall bond allocation in this fund, or else classify it as part of your equity allocation.

cordanmom wrote:3. Is global bond diversification a worthwhile option -Templeton Global (TPINX)(.90)? I currently have a very small quantity of global bond diversification by holding PIMCO and Harbor. Morningstar says that PIMCO has 19% invested outside the US and Harbor has 17%.

I'm no expert on this, but the sense that I get from reading the forums on this is most Bogleheads aren't big proponents on global bonds. For example:

See How to Campaign for a Better 401(k) Plan . FWIW, while your overall plan has some faults, the one saving grace is the low-expense S&P 500 index fund. Granted, when you have 40% of your retirement assets in the 401(k) plan, you need some other options.

A few thoughts: This forum tends to be either pro blend funds (that hold growth, core and value) or pro-value funds. As an asset class, small growth is often regarded as the historically poorest performing of the equity asset classes, although before accepting such an assertion, it might be worth doing some reading, like here:

We see a bigger difference between that particular Growth vs. that particular Value fund over 10 years. Also, keep in mind that growth has been outperforming value recently and the difference here appears more marked, except when trying to discern an important difference between the Growth and the broader, more diversified Blend versions:

Don't let the fact that I learned how to post Morningstar charts fool ya: I'm no expert. I'm just saying that if you stick with VG's version of Sm Growth, it looks like you may not be (too) disappointed when compared to a broader, more diversified fund with lower transaction costs (lower turnover), but to me it makes more sense to go with a broader, more diversified fund with lower transaction costs. Use a Sm Value fund instead, only if you intend on diving into some reading as to the why's and the most effective how's.

It is always a wonderment to have total strangers give you a helping hand.

Livesoft, Thanks for looking over the annual report and for your evaluation. The value of the plan assets was close to 10M (9.6M) with 97 participants. I am grateful to have a trained eye do a once over.

Hoppy,Re: Loomis v. PIMCO, I was just too eager to have some alternative with a lower ER to grow our nest egg. I should have looked closer; it doesn’t help that the financial literature provided by the company doesn’t seem to say much of anything. Thanks for laying it out very clearly.

As for the international bond fund, hedging currency risk is out of my comfort zone (and understanding). I’ll stick to what I have.

Pingo,You have an eye for detail. Thanks for emphasizing the higher contribution limits for 2013. He is already signed up for the increased 401k Company Contribution limit for 2013... If we can qualify, we will take advantage of the others as well, but too early in the year to know what our AGI will be for this year.

I do not have a lower ER on the VSGAX than others, just a typo. I did know that the SV fund is preferred by the forum. I am bucking the system on this one. I don’t want to own all those financial companies (40% as of 11/30/2012). Many hard feelings dictated that choice three years ago and it remains unchanged. I understand that there will most likely be lower returns over the long term…but then again maybe there is a wormhole in that black hole.

Merci.

The best time to plant a tree was 20 years ago. The next best time is now. ~Chinese Proverb

cordanmom wrote:Thanks for emphasizing the higher contribution limits for 2013. He is already signed up for the increased 401k Company Contribution limit for 2013...

Would you mind updating the contributions so we can see roughly how much it would be with the Personal Contribution + Catchup + Company Match?

cordanmom wrote:I do not have a lower ER on the VSGAX than others, just a typo. I did know that the SV fund is preferred by the forum. I am bucking the system on this one. I don’t want to own all those financial companies (40% as of 11/30/2012). Many hard feelings dictated that choice three years ago and it remains unchanged. I understand that there will most likely be lower returns over the long term…but then again maybe there is a wormhole in that black hole.

I can respect that. Do as you feel will best enable you to stay the course. Morningstar shows VG Sm Value (VISVX) with 22% financials, not that it changes your point. I do see that VG S&P Sm Cap 600 Value ETF (VIOX) holds 16% financials, which is even less. I think the truth of it is that regardless of your choice, the financial sector will almost fully represented in your portfolio. Additionally, those financial stocks are just as likely one day to move out of the value arena and be placed in your SG fund.

In performance, there's hasn't been an important difference between the generically titled Small Growth and the blend funds. Again, if it were me, I'd probably move from VSGAX to a Small Blend (NAESX) or Extended Market Fund (VEXMX) because you become more diversified (moreso via VEXMX than NAESX). I suppose doing so might "dillute" the financials versus the SV fund, but certainly not like SG does.

Last edited by pingo on Tue Jan 08, 2013 6:26 pm, edited 2 times in total.

If you're combined income is now phasing you out, he could always forget about regular Roth contributions altogether and make Backdoor Roth contributions without having to spend the time worrying about how much he is allowed to contribute. How? He would open a regular IRA account at Vanguard, make non-deductible contributions in whatever amounts he desires (up to $5,500) and then promptly convert the balance to the Roth account.

I edited/corrected my original post:the ER discrepancy listed for Harbor (HABDX); it should have been .57% (not .85%),IL tax rate at 5% (not 6%), the name for Vanguard’s International fund (No longer All-World), the yearly 401k contribution including the company portion as a dollar amount.

We investigated the Backdoor IRA in 2009. He made a rollover IRA to Vanguard 20 years ago. The tax bite to convert the IRA monies would be prohibitive to making the backdoor option viable to us. It is a great little secret, wish we could partake.

Thanks for pointing out Extended Market Fund (VEXMX) as an alternative fund to appease my aversion to heavy financial funds. I like that has nearly 3,000 stocks, wonderful diversification, but it comes with a somewhat higher ER. I will mull it over. Thanks for your guidance.

I am wondering why such a discrepancy in the financial composition in VG Small Value (VISVX) in two months? I see that the percentage you listed for financial equity portion was 22.24% as of 9/30/2012. It then jumps to 39.10% (I rounded it to 40% in my post) as of 11/30/2012 for VISVX. Why such a big jump?

The best time to plant a tree was 20 years ago. The next best time is now. ~Chinese Proverb

cordanmom wrote:I am wondering why such a discrepancy in the financial composition in VG Small Value (VISVX) in two months? I see that the percentage you listed for financial equity portion was 22.24% as of 9/30/2012. It then jumps to 39.10% (I rounded it to 40% in my post) as of 11/30/2012 for VISVX. Why such a big jump?

cordanmom wrote:Thanks for pointing out Extended Market Fund (VEXMX) as an alternative fund to appease my aversion to heavy financial funds. I like that has nearly 3,000 stocks, wonderful diversification, but it comes with a somewhat higher ER. I will mull it over.

The Admiral shares of the VG Extended Market Fund (VEXAX) has a ER of 0.10%. (Woohoo! Livin' the dream...)

When I compare funds, I can chart longer periods with the Investor class funds. However, I forgot to switch my brain (and suggestion) back to the Admiral share universe.

I was unclear. VFWIX is the Vanguard FTSE All-World ex-US Index Fund, although I see the ER is 0.30% acc. to M* and 0.35% acc. to Vanguard. (The VFWAX Admiral shares have ER 0.18%.)

What I had meant to include (and didn't) is that VFIWX used to be recommended because it offered the universe of non-U.S. equities within a single, efficient index fund (minus Small Caps). It was also preferred because it includes Canada. Total Int'l was a tax-inefficient fund of funds sans Canada. As such, there is definitely nothing wrong with holding VFIWX.

Since then, Total Int'l has become a single, efficient index fund that covers all non-U.S. holdings, including Canada and Small Caps. As such, VG Total Int'l is now the go-to Int'l fund. It's ER is 0.21% for VGTSX and 0.18% for VTIAX.

6 of one, half a dozen of the other. It's just like me to spend time on something that doesn't matter much, if at all!

cordanmom wrote:We investigated the Backdoor IRA in 2009. He made a rollover IRA to Vanguard 20 years ago. The tax bite to convert the IRA monies would be prohibitive to making the backdoor option viable to us. It is a great little secret, wish we could partake.

You are absolutely correct. I looked and looked—that is, I (over)looked and (over)looked and missed that big ol' IRA right in front of me. (sigh)

Last edited by pingo on Fri Feb 08, 2013 11:19 pm, edited 2 times in total.

You have a handle on what you're doing, with a great plan to boot. I offer the following food for thought in case it makes things simpler. I welcome feedback, in case it doesn't make as much sense as I thought it did when I worked it out.

Comments:*11 funds instead of 15*Minor shift in balance of TIPS : Nominals*Rebalancing in only 2 accounts (401k & His IRA) instead of 3 or 4*Stable Income is equivalent to ST bonds; HSA now filled by Harbor Bond (same as Pimco TR, lower ER)*Increasing S&P 500 in 401k lowers overall cost; largest contributions go to S&P 500, so I eliminated Total Stock and added Extended Mkt to complete S&P 500 and to overweight Md-Sm based on your original Lg: Sm relationship, rather than market weight

Last edited by pingo on Thu Apr 04, 2013 6:42 pm, edited 5 times in total.

Pingo: My sincerest thanks for your guidance in simplifying and lowering the costs of my portfolio. 1. Best news: I am down to 11 retirement funds and I still have wonderful diversification. All my funds at Vanguard are now Admiral!2. Your “big picture” analysis allows me to exploit the lower ER in Harbor Bond offered in the HSA Account, rather than relying more heavily on the higher ER for Pimco Bond offered in His 401(k). It would never have dawned on me.3. Increasing the weighting of the S&P 500 with a lower ER in His 401(k). Ditto: It would have never occurred to me.4. I decided to leave All-World Sm Cap in His Vanguard Roth because I would have been required to pay a redemption fee (.50%) and then a purchasing fee (.50%) to buy it back in His Vanguard IRA. Regrettably, I ended up with 33% (instead of 28%)international. I haven’t located my math error, but I will address my mistake next quarter. 5. I have to admit that the heavier weighting in small/medium cap was due to ignorance. I never rebalanced based on capitalization when I set up my portfolio three years back. I have only been rebalancing based on bond/stock allocation. I will read up on what is optimal.6. Feedback: Pingo post 913 – Le plus beau jamais!

The best time to plant a tree was 20 years ago. The next best time is now. ~Chinese Proverb

cordanmom wrote:Best news: I am down to 11 retirement funds and I still have wonderful diversification. All my funds at Vanguard are now Admiral!

Well done!

cordanmom wrote:I decided to leave All-World Sm Cap in His Vanguard Roth because I would have been required to pay a redemption fee (.50%) and then a purchasing fee (.50%) to buy it back in His Vanguard IRA.

Your first post has All-World Sm Cap in His Vanguard Traditional IRA and I left it alone. Did I confuse you when I rounded the percents? Perhaps I misunderstand?

cordanmom wrote:Regrettably, I ended up with 33% (instead of 28%)international. I haven’t located my math error, but I will address my mistake next quarter.

Combined International allocations:10% Vanguard Total International - Adm (VTIAX)(.18)02% Vanguard All-World ex-US Small Cap (VFSVX)(.50)02% Vanguard Total International - Adm (VTIAX)(.18)14% International

International (14%) ÷ Total (49%) Total Equities = 28.57% of equities

I see that you could actually have 50% in equities by moving some 401k bonds into the S&P 500 fund to increase it to 23%. Doing so gives you an international allocation of exactly 28%. I don't remember why I didn't do it originally...

If I missed something and my accounting is in error, keep in mind that 33% International isn't so different from your desired 25-30%. Also, my idea directs only 14% of equity contributions into International stocks. Likewise Extended Market is overweight (based on prior portfolio), but is "underfunded" by receiving only 13% of new U.S. equity contributions (vs. 20% which is closer to market weight). With most new contributions going to the S&P 500, one could let the low contributions gently bring you down to the preferred range of International or Extended Market. Otherwise, one would maintain the weights by adjusting/rebalancing them within His Vanguard Traditional IRA.